Dynamic pricing and personalized pricing. These terms most probably sound familiar to you if you manage a hotel. But what exactly does dynamic pricing mean in the hotel industry? Why do you need it? What do you need it for? And most importantly: how to use it successfully?
My goal is to answer these questions in the upcoming weeks. Let's start!
Shortly, dynamic pricing is a strategy that uses variable prices instead of fixed prices. The essence of the method is to adjust the price of services and products to the constantly changing needs of the market. Dynamic pricing means updating prices in real-time in quick response to changing market demands, which is why dynamic pricing is also called real-time pricing. For a hotel, this strategy can be applied to rooms sold through online travel agencies.
It’s important not to confuse it with personalized pricing. Personalized pricing monitors not only consumer demand, but also different customer groups and their behavior, and updates the price accordingly. In the hotel industry, personalized pricing should be used carefully as it requires a huge amount of personal data.
Therefore, in this article we focus on a dynamic pricing strategy that helps optimize sales without putting guests’ personal information in potential danger.
As a hotel or revenue manager, your main job is to minimize the number of unoccupied rooms and maximize the price guests pay for that room. We know this is a challenging task because competition is strong and the demand, therefore the market is constantly changing. This is where the hotel’s dynamic pricing strategy comes in, which helps in two ways:
Dynamic pricing is about to price your rooms at or just a tiny below the market price so that potential guests choose your hotel over your competitors. What does this mean for you? Increased occupancy and, of course, higher revenue.
In periods when demand and occupancy are lower, prices also decrease. This will hit two birds with one stone:
Dynamic pricing adjusts average room rates to suit guests' behaviour and booking habits. With that it helps you to get to know your existing and potential guests better:
Thanks to this information, average room rates can be adjusted according to changing guest needs. This helps you reach the main goal: higher occupancy with maximized revenue.
You will certainly need a reliable hotel PMS that provides you with transparent, comprehensive and real-time reports. That's exactly what SabeeApp PMS offers to you. Based on these reports you can successfully invent dynamic pricing strategies in your hotel.
The microdata is valuable booking and guest information. You can get them from your PMS, so only you and your staff have access. I recommend starting the process with this data.
Examples of microdata:
You can usually access this information free or through paid services that are available to almost anyone. OTAs also have a huge amount of information that you can access on the extranet.
Examples of macrodata are:
Based on this article, you now have a better understanding of what dynamic pricing is and why it is so important in the hotel industry. Next week, we’ll be one level up on the subject and I’ll help you figure out how to successfully use a dynamic pricing strategy in your hotel. Stay tuned!
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